2010-06-29

US Dollar history since 1999 and some predictions

This is a graph of the US Dollar Index since 1999.



Annoyingly, the St Louis Fed "FRED" online tool does not have a USDX graph to check, so I had to add in all the different currency values onto a spreadsheet and then apply all the various weightings. This graph begins in 1999 because the Euro was not around before then and, while I'm sure there are equations and whatnot to cover this change, I haven't found them yet!

But as you can see the US Dollar reached its peak at around the same time as the dotcom boom went bust in 2000-2001. It fell steadily to around 2005, when it regained value somewhat and then fell further until early 2008. Of course the steep rise in mid-late 2008 was due to the effects of the credit crunch and a small plateau of sorts developed before further devaluation began and lasted until November 2009, when it began to rise again. The figure for May 2010 was 85.33.

One of the predictions I made for 2009 was a devaluation of the currency to below 60 on the US Dollar Index. Of course this didn't happen but I'm reasonably confident that it will devalue below 60 at some point. The long term trend is downwards, with a high  of 118.98 in February 2002 and a low of 72.11 in April 2008 seeing a maximum decline of approximately 40% (though in May 2010 the decline from February 2002 was around 28%).

At the moment, consumer prices in the US have declined for two months and the effect of the Obama stimulus plan has begun to wear off, which means that we are heading for a more muted economic performance. I think GDP in Q2 2010 will be very low and I am expecting at least one quarter of negative growth this year. At best we'll see some further deflation and at worst a second credit crunch to rival Q4 2008, which means that investors are probably going to push the Dollar up again as they run away from stocks - a process which has already begun if you look at the far right hand side of the graph.

The only fly in this predictive ointment is European GDP growth in Q2 2010. I believe that EU growth will be higher than US growth during this period and investors will be surprised by European economic strength - to the point where yields on PIIGS bonds will drop. How long this will last I don't know, but monetary conditions in Europe in the last three months have certainly been very strongly inflationary (Switzerland will head them all, whilst Greece will be reasonably poor) whereas monetary conditions in the US have more or less been neutral (and tending deflationary).

2010-06-27

OSO's Debt Watch - July 2010


GDP = $14.5924 Trillion (Current Dollar, 2010 Q1 third estimate)
Public Debt = $8.55629348663055 Trillion (2010-06-24)
Total debt owed to foreign holders of treasury securities = $3.9574 Trillion (2010-06-15)
Debt/GDP ratio = 58.64%
Foreign ownership of debt/GDP ratio = 27.12%
Population = 309,606,649 (Resident Population + Armed Forces Overseas, 2010-05-01)
GDP per capita = $47,132.06
Public Debt / person = $27,636.01
Foreign Public Debt/ person = $12,782.03
GDP per capita minus Public Debt per person = $19,496.05
Tax Receipts = $2.077181 Trillion (Twelve month moving average¹, Monthly Treasury Statement, 2010-05-01)
Tax Receipts as percentage of GDP = 14.23%
Debt/Receipt ratio² = 411.92%
Federal Government Outlays = $3.436559 Trillion (Twelve month moving average¹, Monthly Treasury Statement, 2010-05-01)
Federal Government Outlays as percentage of GDP = 23.55%
For every $1.00 the US government gains, it spends $1.65
Fiscal Surplus/Deficit = -$-1.35938 Trillion
Surplus/Deficit as percentage of GDP = -9.32%
Interest paid on Treasury Debt Securities (Gross, Twelve month moving average, Monthly Treasury Statement, 2010-05-01) = $0.39374 Trillion
Interest paid on Treasury Debt as percentage of revenue = 18.96%
Interest paid on Treasury Debt as percentage of GDP = 2.70%

Notes:
  • Debt/GDP ratio has now passed 58% of GDP
  • Americans owe $7144.68 more than they did in October 2008.
  • Americans net worth has dropped by $6427.63 since October 2008
  • Federal deficit has increased slightly to 9.68% of GDP

In October 2008, GDP was $14.2003 Trillion (Current Dollar, 2008 Q4 final estimate)
In October 2008, Public Debt was $6.18964742400511 Trillion (2008-10-20)
In October 2008, the total debt owed to foreign holders of treasury securities was $2.9797 Trillion
In October 2008, the Debt/GDP ratio was 43.59%
In October 2008, the foreign ownership of debt/GDP ratio was 20.98%
In October 2008, the Population (resident population + Armed Forces overseas) was 305,554,049 (2008-10-01)
In October 2008, GDP per capita was $46,473.94
In October 2008, Public Debt / person was $20,257.13
In October 2008, Foreign Public Debt/ person was $9,751.79
In October 2008, GDP per capita minus Public Debt per person was $26,216.81
In October 2008, Tax Receipts were $2.578156 Trillion (Twelve month moving average¹, November 2008 Monthly Treasury Statement)
In October 2008, Tax Receipts represented 18.16% of GDP
In October 2008, the Debt/Receipt² ratio was 240.08%
In October 2008, Federal Government outlays were $2.747197 Trillion (Twelve month moving average¹, November 2008 Monthly Treasury Statement)
In October 2008, Federal Government outlays represented 19.35% of GDP
In October 2008, for every $1.00 the US government gained, it spent $1.07.
In October 2008, the Fiscal Surplus/Deficit was −$0.169041 Trillion
In October 2008 the Surplus/Deficit as percentage of GDP was -1.19%
In October 2008, interest paid on Treasury Debt Securities (Twelve month moving average, Monthly Treasury Statements) was $0.429994 Trillion
In October 2008, interest paid on Treasury Debt as percentage of revenue was 16.68%
In October 2008, interest paid on Treasury Debt as percentage of GDP was 3.03%

The historical tables of the FY2010 budget (page 24-25) show that:

Highest tax receipts as percentage of GDP: 20.9% in 1944 and 2000.
Lowest tax receipts as percentage of GDP: 2.8% in 1932.
The last time tax receipts were lower than they are now: 13.3% in 1943.
Highest Federal Government outlays as percentage of GDP: 43.6% in 1943 and 1944.
Lowest Federal Government outlays as percentage of GDP: 3.4% in 1930.
The last time Federal Government outlays were higher than they are now: 24.8% in 1946.
Fiscal Deficit - Worst: -30.3% in 1943
Fiscal Surplus - Best: 4.6% in 1948


¹ Measures total tax receipts/outlays over the previous 12 months from the last month measured. eg April 2009 to March 2010.
² The Debt/Receipt ratio measures government revenue (twelve month moving average) as a percentage of current public debt. A good way to compare it would be to compare your current income to what you owe on your mortgage.





2010-06-14

This made me laugh


The complete ridiculousness of a paraphilia based upon the image of a dumb, silent woman...

From here.

2010-06-06

Debt/GDP Ratio: Reagan to Obama



Graphs like this would be even more useful once I discover how to add "recession bars" to it.

Summary:
  1. Reagan oversaw a large debt increase from about 25% of GDP to 40%.
  2. GHW Bush saw a debt increase, but this was affected by the lost revenue of the early 90s recession.
  3. Clinton oversaw a a decline in debt levels from 50% of GDP to just over 30%.
  4. GW Bush oversaw a moderate increase in debt levels during most of his administration, followed by a substantial increase at the end as the GFC hit.
  5. The Obama stimulus was enacted after government finances had dropped substantially.
Conclusions:
  1. Reagan was not fiscally responsible. If we extend the graph back into the 1960s and 1970s, we will see much a much lower debt/GDP ratio.
  2. In hindsight, GHW Bush made a courageous decision to increase taxes ("courageous" meaning sensible but politically suicidal)
  3. Clinton and the Democratic congress begun the process of debt reduction before the 1994 Republican revolution.
  4. GW Bush could have initiated incremental but consistent tax cuts rather than the huge cuts he signed into law in 2001 and 2003. This would've led to improved fiscal circumstances while allowing debt to be retired.
  5. Obama is not to blame for the current fiscal state of the US government.
Sources:

US Foreign Debt as % of GDP



That "bit" with the grey line through it at the end, where debt levels increase substantially, is when the NBER defined recession began (the "GFC"). Sorry about not getting all the dates in (still working out how to use spreadsheets), but the spike near the middle around 10% is 1995-06-30, the peak in the middle which peaks at nearly 15% is 1997-09-30, the trough which reaches below 10% is 2001-03-31, and the plateau after that of around 15% is 2004-09-30.

Sources: